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China's yuan firms on corporate dollar sales, set for winning month
October 31, 2017 / 4:20 AM / 21 days ago

China's yuan firms on corporate dollar sales, set for winning month

SHANGHAI (Reuters) - China’s yuan strengthened against the U.S. dollar, supported by rising corporate dollar sales and a firmer official fixing after a slide in the greenback in global markets on Monday.

FILE PHOTO: A China yuan note is seen in this illustration photo May 31, 2017. REUTERS/Thomas White/Illustration/File Photo

The Chinese currency is on course for its best day in three weeks, while it also looks set for a winning month.

Prior to market opening on Tuesday, the People’s Bank of China lifted its official yuan midpoint to 6.6397 per dollar, 90 pips or 0.14 percent firmer than the previous fix of 6.6487 on Monday.

The stronger midpoint reflected losses in the dollar as investors turned cautious after U.S. President Donald Trump’s former campaign manager was charged with money laundering in the federal probe into Russian meddling in the 2016 presidential election.

In the spot market, the onshore yuan opened at 6.6388 per dollar and was changing hands at 6.6274 at midday, 186 pips firmer than the previous late session close and 0.19 percent stronger than the midpoint.

If spot yuan closes the late night session at the midday level, it would have gained around 0.4 percent against the greenback for the month.

The yuan lost about 1 percent of its value against the greenback in September, the biggest monthly loss since November 2016.

Multiple traders said major Chinese state-owned banks were selling dollars in morning trade to fulfill client orders.

“That was corporate dollar selling, which was financial operations at the end of the month,” said a trader at a Chinese bank in Shanghai.

State-owned banks sold dollars in the forex market in late 2016 and earlier this year in what some traders believe was part of official efforts to prop up the Chinese currency.

Market participants said onshore yuan trade was not affected by recent volatility in the country’s bond market.

China’s 10-year treasury bonds steadied on Tuesday morning as the central bank moved to calm the market with liquidity injections and queried banks on demand for medium-term loans following a sell-off the previous session.

The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 95.83, firmer than the previous day’s 95.79.

The global dollar index rose to 94.575 from the previous close of 94.56.

The offshore yuan was trading 0.03 percent weaker than the onshore spot at 6.6295 per dollar.

Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan’s value, traded at 6.783, 2.11 percent weaker than the midpoint.

One-year NDFs are settled against the midpoint, not the spot rate.

The yuan market at 0333 GMT:

ONSHORE SPOT:

Item Current Previous Change

PBOC midpoint 6.6397 6.6487 0.14%

Spot yuan 6.6274 6.646 0.28%

Divergence from -0.19%

midpoint*

Spot change YTD 4.82%

Spot change since 2005 24.88%

revaluation

Key indexes:

Item Current Previous Change

Thomson 95.83 95.79 0.1

Reuters/HKEX

CNH index

Dollar index 94.575 94.56 0.0

*Divergence of the dollar/yuan exchange rate. Negative number indicates that spot yuan is trading stronger than the midpoint. The People’s Bank of China (PBOC) allows the exchange rate to rise or fall 2 percent from official midpoint rate it sets each morning.

OFFSHORE CNH MARKET

Instrument Current Difference

from onshore

Offshore spot yuan * 6.6295 -0.03%

Offshore 6.783 -2.11%

non-deliverable

forwards **

*Premium for offshore spot over onshore

**Figure reflects difference from PBOC’s official midpoint, since non-deliverable forwards are settled against the midpoint..

Reporting by Winni Zhou and John Ruwitch; Editing by Jacqueline Wong

Our Standards:The Thomson Reuters Trust Principles.
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